Strategy of mBank Group for 2020-2023 - Amazon Web Services...historical financial results or other...

Strategy of mBank Group

for 2020-2023

Growth fuelled by our clients

Warsaw, 12 December 2019

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Legal Disclaimer

This document and the information contained herein (unless otherwise indicated) has been prepared by mBank S.A. (the “Bank”) solely forinformational purposes (the “Presentation”). By reading the Presentation or attending the meeting at which the Presentation is made, you will bedeemed to have (i) agreed to all of the following restrictions and made the following undertakings and (ii) acknowledged that you understand the legaland regulatory sanctions attached to the misuse, disclosure or improper circulation of the Presentation. This Presentation is published only to provideinformation regarding the adoption of the mBank Group’s Strategy for 2020-2023. This material is not connected with the Commerzbank AGannouncement of September 26, 2019, regarding the approval of a strategy including potential sale of the Bank's shares, of which the Bank informed inthe current report 37/2019 of September 26, 2019.

This Presentation does not purport to contain all the information that may be required by the recipient to make an evaluation. The Bank prepared thisPresentation on the basis of information which it has and from sources believed to be reliable. To the extent available, the industry, market andcompetitive position data contained in this Presentation come from official or third party sources. Third party industry publications, studies and surveysgenerally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracyor completeness of such data. While the Bank believes that each of these publications, studies and surveys has been prepared by a reputable source,the Bank has not independently verified the data contained therein. In addition, certain of the industry, market and competitive position data containedin this Presentation come from the Bank's own internal estimates based on the knowledge and experience of the Bank’s management in the market inwhich the Bank operates. While the Bank believes that such estimates are reasonable and reliable, they, and their underlying methodology andassumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly,undue reliance should not be placed on any of the industry, market or competitive position data contained in this Presentation. The Bank is not underany obligation to update or keep current the information contained in the Presentation.

This Presentation contains certain financial data that are non-IFRS measures (“Non-IFRS Measures”). These Non-IFRS Measures, as defined by theBank, may neither be comparable to similarly titled measures as presented by other companies, nor should they be considered as an alternative to thehistorical financial results or other indicators of the Bank’s performance based on IFRS.

This Presentation may contain certain forward-looking statements, estimates, projections and opinions ("Forward-looking Statements") for which theBank shall not be liable. The Forward-looking Statements shall not be treated as the forecasts of the Bank. By their nature, Forward-looking Statementsinvolve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that willoccur in the future whether or not outside the control of the Bank. No representation is made or will be made that any Forward-looking Statements willbe achieved or will prove to be correct. Actual future results and operations could vary materially from the Forward-looking Statements. Similarly, norepresentation is given that the assumptions disclosed in this Presentation upon which Forward-looking Statements may be based are reasonable. Therecipient acknowledges that circumstances may change and the contents of this Presentation may become outdated as a result.

The Presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the solicitation of an offer to purchase,subscribe to or acquire the Bank´ securities, or an inducement to enter into investment activity in any jurisdiction in which such offer, solicitation,inducement or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of such jurisdiction oran advertisement within the meaning of Article 53 section 1 of Polish Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction ofFinancial Instruments to Organised Trading, and Public Companies, as amended. No part of this Presentation, nor the fact of its distribution, shouldform the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This Presentation is not forpublication, release or distribution in any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction nor should itbe taken or transmitted into such jurisdiction.

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Summary: What will mBank be like?

In the horizon of the strategy for 2020-2023:

We will continue mBank’s organic growth, based on the acquisition of young clientsand dynamic companies from prospective industries.

We will accompany our clients throughout their lifecycle and development, designing our products, platforms, access channels and service model according to their needs.

We will remain the most convenient transactional bank and maintain our advantagein this area by providing our customers with ease and speed of use, high security standards, advanced platform, personalisation and a bonus for loyalty.

We will build our offer and solutions based on the mobile first paradigm,increasing the share of sales and service in the digital sphere.

We will intensify optimisation, automation and digitalisation of internal processeswhat will translate into savings and enhanced operational efficiency.

We will be systematically improving our profitability due to rising revenues,decent cost discipline and prudent approach to risk management, while more favourable balance sheet structure will result in higher net interest margin.

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Financial targets of mBank Group for 2020-2023

The strategic goal of mBank Group is to keep the position among top Polish banks in terms of key financial metrics

Our goal is to pay 50% of net profit as a dividend.

Measure Target level Current level

Profitability in 2023 9M 2019 (normalised)

Net interest margin (NIM) ~3.0% 2.7%

Cost/Income ratio (C/I) ~40% 43.4%

Return on equity (ROE net) ~10.5% 7.9%

Stability every year 30.09.2019

Loans/Deposits ratio in a range of 92-94% 90.3%

Capital ratiosyear-end level min 1.5 p.p. above PFSA requirements

2.2 p.p. higher for Tier 1 ratio, 2.3 p.p. for Total Capital Ratio

Growth CAGR 2019-2023 CAGR 09.2016-09.2019

Dynamics of loans ~6% 8.7%

Dynamics of deposits ~6% 10.8%

Dynamics of total revenues ~8% 9.7%

Dynamics of total costs ~5% 6.3%

Note: Normalised ratio (refers to Cost/Income ratio and return on equity) after 9M 2019 includes ¾ of an annual contribution to the resolution fund, booked in total in Q1/19.For the calculation of CAGRs of revenues and costs for the period 09.2016-09.2019 the data for 4 quarters preceding the given date was used, excluding one-off events.

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Four pillars of the new strategy for 2020-2023 correspond to the key components of mBank’s business model

In the strategy for 2020-2023, mBank Group will focus on 4 areas

Client PlatformAcquisition &

long-term relationsEcosystem &

user experience

EfficiencyOperational advantage

Employees& organisation culture

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Pillars of mBank Group’s strategy for 2020-2023

Client (acquisition and development of long-term relationships)

We will grow organically through the continuous acquisition of new customers, in particular young people and firms. We will strengthen our position in the most profitable age group of 30-45.

Leveraging on the social role of parents who are mBank’s clients, we plan to faster enter into relations with clients aged 8-13

Family banking

We will solicit the segment of professionals providing services for other entrepreneurs(e.g. accountants)

Professionals

With relatively high penetration in large agglomerations, we want to strengthen our position in mid-sized cities (current share at ~7%)

Mid-sized cities

We will maintain our position in the following segments:

Individuals aged 13-28 years

Start-ups

E-commerce

Young customers

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We will improve customer retention and loyalty throughout theirlife cycle.

WeddingMortgageChildbirth

Retirement

SchoolUniversityFirst Job

&Key facts:

Polish population is ageing

In 2025, the generations of 30- and 40-year olds will together make up about 30% of the population of Poland

mBank’s participation in this group is relatively high (~12%), but at the same time the strength of relations is weakening

We will:

identify the most important stages in the customer life

recognise life events related to the difficulties such as divorce, diseases or accidents and offer help

retain profitable clients through anchor products: mortgage loans, savings and investment products

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We will create a platform for cooperation with corporate clients based on partnership, convenience and professionalism.

Long-term relationship

Direct contact is essential when establishing relations

Availability of local advisors

Advisors’ competences

Corporate clients appreciate professional,less formal contact

Proactive attitude of mBank’s advisors

Knowledge and the flow of experience

Process automation

Convenient corporate banking services

Self-servicing in corporate banking

Development and delivery of simple solutions

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We will shape the portfolio of corporate clients anticipating trends and changes in the environment.

Key tasks:

Include dynamic companies in portfolio

Maintain individual approach to large corporations

Develop platform connecting entrepreneurs

Support clients in value creation (including M&As) and succession process

Support and promote responsible companies

Implementation:

Building industry knowledge, defining potential clients from specified industries

Creating adequate policies, work procedures, limits and product pallets

Conducting cross-sectional research

Preferred industries in corporate portfolio:

CORPORATE LOAN

PORTFOLIO

E-commerce Health care

Automation and

digitalisation

New technologies

Leisure timeRenewable

energy sources

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We will extend our knowledge about the customers in both segments.

Set in order all data collected about corporate customers

Gather conversation data from contactswith retail clients

Develop voice analytics (contextual analysis of conversations)

Organise available data in order to create useful information

Better understanding of the clients

Optimisation of contact management, both in the contact center and in outlets

CRM and sales channel effectiveness measurement

Banking products suitedto the clients’ needs

Data analysis ResultsClients’ data

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We will increase the likelihood of recommending mBank’s servicesby our clients.

Banking decisions of more than 60% of customers are connected with the recommendationof trusted persons.

We will:

offer the quickest way „to get things done”

eliminate waiting and unnecessary efforts of the customer

appreciate loyalty

personalise clients’ experiences

act in a predictable manner

represent uncompromising business ethics

provide a sense of security with reliable technological banking solutions

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We will pursue the principles of empathy in contacts with customers.

We will shape the positive image of the bank and make the brand appealing for retail and corporate customers.

Simplify the offer in each business line, including the price list and tariffs

Reduce the amount of marketing information - No2Spam

Assistance in the event of failure during operations in the transaction system, using a card, etc.

Strengthen the image of mBank as a professional institution

Rely more on feedback provided by customers,change the organisation to meet their expectations

Improve the most important points of contact

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Platform (ecosystem & user experience)

We will continuously improve remote bank access channels usingthe digital first (mobile first) approach.

We will focus on:

revolutionary digital assistance in the service model: all frontline employees will become part of the digital channels

e-Commerce UX (user experience), digital assistance and personalisation of price offers

omni-sale with better reporting, change management and sales control

API model for extended range of the sales platform, incl. e-commerce

12/1712/16 12/18

854

09/19

1,181

1,484

1,808

+324

Distribution model transformation: 80% of sales in own digital channels & API and 50% in mobile mode in 4 years

Active Users of mBank’s Mobile App (thou.)

Leading roleof mobile

application

Contact Center and branches as a support

function

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We will develop mBank’s retail platform by complementing it with additional products and services, including non-financial ones,in order to ensure complete customer service.

We will provide personalised offer:

Savings, investments and retirement-oriented products benefiting from mBank’s partnerships

Innovative lending:

fast credit decisions and effective use of the transaction-related moments for distributionof consumer loans through mobile channels

offering the most convenient and fastest mortgage loan on the market

Enriching the platform with value-added services while keeping it simple and transparent

Selective use of API and cooperation with mAccelerator as well as test value recognition with customers

Source: Picture: the RS2 report Open Retailing and Open Banking – Payments Industry Challenges.

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We will build the best digital banking offer for corporations in Poland.

Corporate transactional

clients

Growing digitalisation

ratio

Simplified sales and

credit processes Enhanced

customercontact

channels

TARGETS

Agileapproach

Customer self-service

Convenience

Process management

Omnichannelbanking

KEY RESULTS

Reduced C/I ratioin C&IB

Digitalisation

Simplification

Simplification-oriented targets reflected in improved transactionality

and self-service of customers

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Efficiency (operational advantage)

We will maintain our technological advantage in the financial sector.We will optimise our IT architecture using leading solutions.

Technologyadvantage

IT Architecture

We will:

expand our business-technology team

invest more in the development of competences of our employees (both technical and soft skills)

provide interdisciplinary teams ensuring end-to-end solution delivery

continue to make our structure and work organisation more flexible

We will:

migrate key applications to a modern technological pile based on micro-services and containers by 2023

increase the automation of IT processes

transfer existing systems to other, cheaper platforms

release the potential of a public cloud computing

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We will increase the scope of customer digital self-service.We will optimise our sales network.

Digital Assistant and adaptive user interface

Automated NPS and FCR measurement

Improve customer experience in omniservice

Emphasized service design with advanced tests

and the involvement ofour customers

Maintain the number of branches at the 2020 level

Adjust the design and equipment and adapt it to habits of our customers

Implement automatic text and voice assistants

Safe contact with the bank on popular instant messengers available

Outlays of mobileapplications and browser services for entrepreneurs

Personalisation of interfaces with AI support

Physical network Contact center Mobile First

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We will improve the operational efficiency of the bank by implementing automation on a large scale and simplifying processes.

Centralisation ofoperational processes

Process takeover entirely by specialised operating units

Relieve the burden of business units

End-to-end process ownedby one person only

Set a definition of process ownership

Measurement of costs of processes in the organisation

Elimination of paper documentations flow

Educating employees in various systems in the bank

Simplification ofinternal processes

Methodology based on best market practices

Central measurement system

State-of-the-art analytical and process engineering tools

Unified methodologyfor managing operations

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We will shorten the time of issuing opinions and internal consultationsin implementing new solutions, while maintaining full alignment with regulations and compliance requirements.

We will provide highest cyber security standards.

Simple language in formal communication

Regulatory technology in compliance and legal area

Automation of processes, flexibility, better cooperation

Strict compliance with all laws and regulations

Maintain investments in educational programs for the clients in the field of security

Continue to intensively develop solutions protecting our customers

Focus on the latest technologies, including machine learning, artificial intelligence, biometrics and other

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Employees and organisation culture

We will:

promote our desired values

apply feedback to all HR processes throughout the employee's life cycle

focus on breaking down hierarchical structures

use tools supporting mobility and agile methods

implement Objectives and Key Results system

increase the diversity of characters, personalities, experiences, gender and age

We will:

increase work efficiency by providing employees with the best applications, software and IT equipment

automate simple and repetitive tasks and focuson value-adding activities

implement RegTech solutions to help employees comply with procedures and regulatory requirements

use HR technologies and predictive analytics to make informed decisions about investing in people

We will:

coach smart managerswho know how to inspire development, bring out value from diversity and encourage to care about clients through strategic thinking, innovation and willingness to take up challenges

encourage employees to experiment, be open to technologies, automate processes and look for new solutions

be regulations-compliantand empathic

Technology-supported work environment that inspires to be innovativewill be built on three key levels:

People TechnologyCulture of cooperation

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mBank’s CSR strategy will drive us to benefit our customers, employees, the environment and the society

mBank educatesmBank cares about

the climate andthe environment

mBank promotes prosperity

Be among top three leaders of social responsibility in the banking sector

Top aim

Direction guidelines

Sustainable Development Goals (SDGs)set by the United Nations

Focus areasBank-relevant SDGs chosen from 17 universal objectives, organised in 3 areas:

Corporate Social Responsibility and Sustainable Development Strategy of mBank

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Organisation and support of national competitions and

grant programmes

Equal chances for high quality

education

Protection of customer data

and clients’ finances

Key CSR goals (1/3):mBank educates

We support the development of mathematical education and equalize educational opportunities for young people.

We teach how to use online and mobile banking safely. We make customers more sensitive to cybercrime threats in the banking area.

Social and educational campaigns

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mBank in the ESG Index (GPW)

Eco-supportive products in each customer segment

Credit policy regarding industries relevantin the context ofEU climate policy

Measurement and reduction of our carbon footprint

Reduction of energyconsumption

Reduced footprintof our car fleet

Saving water, paper and office supplies

Waste segregation& recycling

Suppliers’ selection by ESG standards

Key CSR goals (2/3):mBank cares about the climate and the environment

We limit our indirect impact.

We limit our direct impact.

Key CSR goals (3/3):mBank promotes prosperity

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We support organisations that work for social welfare.

We communicate with our customers in a fair, clear and transparent way.

We are accessible to clients with disabilities (inclusive banking).

We act ethically.

We ensure diversity and equal opportunities.

mBank’sDiversity Policy

mBank’s Codeof Conduct 2.0

Periodic audit by the Polish Language Foundation

Continued cooperation with WOŚP

Support for entrepreneurial

women

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All objectives defined in the new strategy are part of mBank’s mission, which remains:

To help.

Not to annoy.

To delight…

Anywhere.

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